Question

The corporate tax formula differs from the individual tax formula because the ________.

1) corporate tax formula has significant differences in the definition of gross income
2) corporate tax formula does NOT consider tax credits while the individual tax formula considers tax credits
3) individual tax formula separates deductions into those before AGI and those after AGI while the corporate tax formula does not
4) corporate tax formula has no provisions for excluded income and the individual tax formula has no provisions for deferred income

Answer 1

The corporate tax formula mainly differs from the individual tax formula in the way deductions are treated. The correct answer is option 3).

Step-by-step explanation:

The corporate tax formula differs from the individual tax formula because the individual tax formula separates deductions into those before Adjusted Gross Income (AGI) and those after AGI while the corporate tax formula does not.

Corporation taxes are based on net profits, where taxable income is generally financial statement income adjusted for tax purposes. The corporate tax formula differs from the individual tax formula because it has significant differences in how gross income is defined.

There are also corporate tax brackets and an effective corporate tax rate, which takes into consideration tax benefits included in a current tax year. Unlike individual taxes, corporates do not have provisions for items like standard deductions and personal exemptions, and tax credits are applied differently.